1 Defendant originally moved to dismiss the complaint onDecember 2, 2008 when the case was pending before our latecolleague, Judge Thomas M. Golden. See Memorandum of Law inSupport of Balfour’s Motion to Dismiss (“MTD1"). H&K respondedon January 1, 2009. See H&K’s response (“Pl. MTD1 Resp."). Balfour replied a month later. (“Def. MTD1 Repl.”). Almost twoyears elapsed before the Chief Judge reassigned this case to us,following Judge Golden's death. We denied the motion to dismisswithout prejudice and ordered the defendant to file a renewed andupdated motion to dismiss. Relying in large part on theiroriginal motion to dismiss, defendant filed a renewed motion. See Brief in Support of the Amended Motion to Dismiss and/or StayLitigation (“MTD2"). H&K responded relying in large part on itsoriginal response (“Pl. MTD2 Resp."). Defendant thereafterreplied (Def. MTD2 Repl.”). Because the parties both rely ontheir previous motions and responses, this Memorandum addressesthe arguments presented in both sets of motions to dismiss, theresponses thereto, and the replies.

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

HAINES & KIBBLEHOUSE, INC. : CIVIL ACTION:

v. ::

BALFOUR BEATTY CONSTRUCTION, :INC. : NO. 08-5505

MEMORANDUM

Dalzell, J. June 1, 2011

Plaintiff Haines & Kibblehouse, Inc. (a Pennsylvania

corporation) (“H&K”) seeks declaratory relief and judgment in

this diversity action against Balfour Beatty Construction, Inc.

(a Delaware corporation with its principal place of business in

Atlanta, Georgia) (“Balfour”) in an amount in excess of $1

million. Compl. ¶ 143, 150, 158, 165, 178. Balfour moves to

dismiss the case for failure to state a claim and/or to stay

litigation pursuant to Fed. R. Civ. P. 12(b)(6) and Fed. R. Civ.

P. 12(b)(7).1

2

As will be seen, given the unusual procedural posture,

we must embark on an extended analysis of relatively arcane areas

of law in order to decide this motion.

I. Factual Background

Balfour was the general contractor for the Commonwealth

of Pennsylvania's Department of Transportation (“PennDOT”) for

the construction of the Route 222 Bypass project (the “Project”).

Compl. ¶ 13. On March 15, 2004, Balfour entered into a contract

with PennDot to furnish work, labor, materials and services for

the construction of the Project. Id. ¶ 15. Balfour’s contract

with PennDot involved about $57.7 million (the "Prime Contract").

Id. ¶ 16. On April 21, 2004, Balfour entered into a subcontract

with H&K in the initial amount of $13,399,897.20 (the

“Subcontract”). Id. ¶ 17. The Prime Contract included a special

provision for project milestones. Id. ¶ 18.

The special provision required that all Project

construction would be completed on or before July 7, 2006 or

Balfour would be subject to PennDot's assessment of road user

liquidated damages. Id. ¶ 19. Because PennDot did not issue the

“Notice to Proceed” on the Project by the date the Prime Contract

anticipated, PennDot granted a seventy-three-day extension to the

Project milestone date. Id. ¶ 21. This extension revised the

Project milestone date from July 7, 2006 to September 19, 2006.

Id. ¶ 22.

H&K avers that Balfour knew that if Balfour failed to

3

complete the predecessor work and did not provide H&K with

unrestricted access to the worksite, H&K could not complete the

work it was contracted to do and this would result in H&K's

increased costs and expenses for which Balfour would be held

accountable. Id. ¶ 36. H&K also avers that at no time prior to

entering into the Subcontract did Balfour inform H&K that Balfour

would be making unilateral changes to the sequence or durations

of predecessor work that would directly affect H&K’s work, but,

instead, expressly and impliedly agreed "to efficiently progress

the work." Id. ¶ 43 [sic].

H&K claims that Balfour "failed to commence, prosecute

and complete the predecessor activities" in the prescribed

sequences and within the specific timeframe agreed to with H&K

and upon which H&K based its pricing. Id. ¶ 63. When Balfour

notified H&K to proceed with its subcontract work, Balfour had

not completed the predecessor work and had not yet procured the

materials to complete the work H&K agreed to do. Id. ¶ 65. H&K

claims that Balfour’s failure to complete the predecessor work

with diligence and with sufficient manpower and equipment, as

well as its denial of full access to the site to H&K interfered

with the planned sequence of operations by H&K and caused H&K to

incur additional costs. Id. ¶ 68.

As of November of 2005, the Project was significantly

behind schedule, the necessary predecessor work needed for H&K’s

placement of subbase and paving remained incomplete, and Balfour

allegedly had made many unilateral changes to the schedule and

2 Balfour disputes this contention. This dispute will becanvassed at length below.

3 As noted, the case was originally assigned to the lateJudge Golden.

4

sequence for the remaining work. Id. ¶ 92. Although the Project

was supposed to be completed in late 2006, it was not completed

until late 2007. Id. ¶ 96. Balfour has not yet fully paid H&K

for the impacts of its poor scheduling on H&K’s work. Id. ¶ 98.

H&K claims that Balfour has also failed to make a claim to

PennDot for the increased costs of H&K completing its work,

including, but not limited to, the increase in the unit prices

for the work H&K performed.2 Id. ¶ 99.

H&K believes that as of September 19, 2006 PennDot

began assessing liquidated damages against Balfour. Id. ¶ 111.

PennDot never assessed damages against H&K. Id. ¶ 113. H&K

estimates that the minimum impact of Balfour's failings on H&K’s

work exceeded ten million dollars. Id. ¶ 117.

II. Procedural History

The crux of this motion to dismiss will be found in the

relationship between H&K and the courts rather than the

relationship between the parties. On September 18, 2006, H&K

filed a complaint against Balfour in the Montgomery County Court

of Common Pleas. Balfour removed that case to federal court at

C.A. No. 06-48073 and filed a motion to dismiss. Judge Golden

dismissed without prejudice all of H&K’s claims except H&K’s

claim for declaratory relief. Judge Golden remanded that claim

5

back to state court on June 7, 2007. In doing so, Judge Golden

relied upon Balfour’s Subcontract-based defenses to the action,

holding that:

The plain meaning of Article 2.2.20 is thatany claim that the subcontractor (Plaintiff)has for performing extra work or arising outof a delay or any other claim, whether it beagainst PennDot or the Contractor (Defendant)must first be compensated by the Owner(PennDot) to the Contractor (Defendant)before Plaintiff can bring suit against theDefendant.

Haines & Kibblehouse, Inc. v. Balfour Beatty Constr., Inc. , No.

06-4807, slip. op. at 4 (E.D. Pa. Jun. 7, 2007) (we shall refer

to this case hereinafter as "Haines I") (emphasis in original).

H&K filed a motion for reconsideration of that Order, which Judge

Golden denied on July 27, 2007. Haines I, slip. op. at 1 (Jul.

27, 2007). Judge Golden also in that Order denied H&K’s request

to certify the Court’s Memorandum Opinion for interlocutory

appeal. Id.

H&K nevertheless on August 22, 2007 filed a Notice of

Appeal from Judge Golden's July 27, 2007 Order in the hope of

standing on its complaint and securing appellate review of the

four counts that Judge Golden dismissed without prejudice. MTD1,

Ex. 5 (Letter brief of Sept. 5, 2007 in C.A. No. 07-3520 (3d

Cir.)). H&K declared that "there is no way for H&K to cure the

'defect' that the District Court found in the Complaint" because

the condition precedent, as Judge Golden defined it, "will never

be achieved." Id. at 3. Thus, H&K contended to the Court of

Appeals that “H&K must stand on the allegations in the Complaint

4 28 U.S.C. § 1447(d) reads, “An order remanding a case tothe State court from which it was removed is not reviewable onappeal or otherwise, except that an order remanding a case to theState court from which it was removed pursuant to section 1443 ofthis title shall be reviewable by appeal or otherwise.”

6

and the order denying the Motion for Reconsideration of the June

5, 2007 Order must be considered a final order.” Id. at 5. On

January 30, 2008, our Court of Appeals issued an order providing

that although it was not appropriate at that time to dismiss the

case based on a jurisdictional defect, that view did " not

represent a finding that the Court has jurisdiction to hear the

appeal in this case." Pl. MTD1 Resp., Ex. H (Order dtd. Jan. 30,

2008 in C.A. No. 07-3520 (3d Cir.)). The parties instead were

ordered to address the effect of 28 U.S.C. § 1447(d) 4 on the

Court’s appellate jurisdiction. Id.

Thereafter -- but before our Court of Appeals set a

briefing schedule -- the parties were obliged to participate in

the Third Circuit’s mandatory mediation program. Pl. MTD2 Resp.

at 6 n.6. The mediation did not succeed. Id. The Mediation

Program Director, however, did not inform the Case Manager that

the mediation had failed, id., and so a briefing schedule did not

promptly issue. Pl. MTD2 Resp., Ex. K (September 25, 2008

correspondence from Paul A. Logan, Esq., to Joseph A.

Torregrossa, Esq.). H&K pressed our Court of Appeals to issue a

scheduling order, which it ultimately did on September 29, 2008.

Id., Ex. K; MTD1, Ex. 10.

H&K claims that before the briefing schedule could

5 H&K merely sent a two-sentence letter to the "Office ofthe Clerk". See MTD2 Resp., Ex. O.

7

issue, it discovered that Balfour had failed to include H&K’s

claim in its Board of Claims complaint, despite Balfour’s

representations that it would include H&K’s claims in that

complaint. Pl. MTD2 Resp. at 6 n.7. Balfour indeed filed an

amended complaint in the Board of Claims on November 9, 2007.

Id., Ex. N. H&K asserts that, as with the original complaint,

Balfour’s amended complaint to the Board of Claims also failed to

mention H&K by name or include any of its claims. Id. at 7. On

April 29, 2008, PennDot’s litigation counsel, Jeffrey W. Davis,

Esq., confirmed to H&K's counsel that the pleadings failed to

identify any affirmative subcontractor claims, and PennDot

invited Balfour to provide clear and specific evidence that

Balfour presented any of H&K’s claims to PennDot. Id., Ex. M.

H&K avers that once it learned from PennDot's counsel

that Balfour had indeed not included its claims in Balfour's

amended complaint to the Board of Claims, it informally sought to

“withdraw” its appeal.5 MTD1, Ex. 8, 10; Pl. MTD2 Resp., Ex. O.

H&K did not do this until November 5, 2008, one day after it had

filed a new complaint in the Court of Common Pleas of Montgomery

County. See generally plaintiff’s complaint. As Balfour would

not consent to such a “withdrawal” of H&K’s appeal, it instead

moved to dismiss H&K’s appeal on December 3, 2008. Pl. MTD2

Resp., Ex. P. In response, on December 17, 2008 H&K moved to

voluntarily dismiss its appeal. Id., Ex. Q. On January 22,

8

2009, our Court of Appeals granted H&K’s motion to voluntarily

dismiss its appeal. Id., Ex. R (Ord. of Jan. 22, 2009 in C.A.

No. 07-3520 (3d Cir.)).

Meanwhile, Balfour removed H&K’s second state court

action to this court on November 24, 2008 ("Haines II"). This

second complaint had the same parties, the same claims, and

involved exactly the same set of alleged facts as the first

action. Balfour promptly filed a motion to dismiss the complaint

based, in part, on claim preclusion. Judge Golden heard oral

argument on the motion to dismiss but did not rule on it before

he died. Haines II was then transferred to our docket. As

noted, given the long delay and the tortured history in the Court

of Appeals, we denied the motion to dismiss without prejudice and

afforded Balfour the right to file an amended motion to dismiss.

Balfour thereafter filed an amended motion to dismiss and/or stay

the litigation, which we now address.

III. Analysis

Balfour moves to dismiss this action pursuant to Fed.

R. Civ. P. 12(b)(6) for failure to state a claim. It also moves

under Rule 12(b)(7) for failure to join an indispensable party.

In the alternative, Balfour moves to stay this action pending

resolution of the dispute between it and PennDot. H&K responds

that its discovery that Balfour had not included its claims in

its amended complaint to the Board of Claims was a “watershed

development” in the context of H&K's Third Circuit appeal and its

6 To survive a Rule 12(b)(6) motion, a party's factualallegations must raise a right to relief above the speculativelevel, and a complaint must allege facts suggestive of illegalconduct. Bell Atlantic v. Twombly, 550 U.S. 544, 563 n.8 (2007);Phillips v. County of Allegheny, 515 F.3d 224, 232 (3d Cir. 2008)(citing Twombly). The Supreme Court recently clarified theTwombly standard in Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009),where it held that a complaint must contain sufficient factualmatter to state a claim for relief that is “plausible on itsface.” Iqbal, 129 S.Ct. at 1949 (internal quotations omitted).

A claim has facial plausibility when the plaintiffpleads facts sufficient to allow the court to “draw thereasonable inference that the defendant is liable for themisconduct alleged.” Id. The plausibility standard is not asdemanding as a “probability requirement,” but it does oblige aplaintiff to allege facts sufficient to show that there is morethan the mere possibility that a defendant has acted unlawfully.Id. (internal quotations omitted).

Iqbal established two principles that now underlie theRule 12(b)(6) inquiry. First, although a court must accept astrue the factual allegations in a complaint, this does not extendto legal conclusions. Id. “Threadbare recitals of the elementsof a cause of action, supported by mere conclusory statements, donot suffice.” Id. Second, a complaint must state a plausibleclaim for relief to survive a motion to dismiss. Id. at 1950. Determining whether a complaint states a plausible claim forrelief is “a context-specific task that requires the reviewingcourt to draw on its judicial experience and common sense.” Id.If the well-pleaded facts allege, but do not “show” more than themere possibility of misconduct, then the pleader is not entitledto relief within the meaning of Rule 8(a)(2). Id.

In deciding a motion to dismiss, “courts generallyconsider only the allegations in the complaint, exhibits attachedto the complaint, matters of public record, and documents thatform the basis of a claim. A document forms the basis of a claimif the document is ‘integral to or explicitly relied upon in thecomplaint.’” Lum v. Bank of America, 361 F.3d 217, 222 n.3 (3dCir. 2004) (internal citations omitted).

9

Montgomery County remanded matter because it showed that the

condition precedent Judge Golden articulated had not been met and

this “eviscerated the factual underpinnings of the June 2007

Order,” thereby rendering that Order moot. Pl. MTD2 Resp. at 7.

A. Defendant’s Rule 12(b)(6) Motion to Dismiss 6

10

Balfour argues that H&K has failed to state a claim

upon which relief can be granted because Haines II is barred by

claim preclusion. Should we not find that the entire action is

barred by claim preclusion, Balfour further argues that H&K is

barred by judicial estoppel from claiming that Judge Golden’s

July 27, 2007 Order was not final. Finally, Balfour argues that

if we do not find that the action is thus barred, there are

alternative, independent reasons why H&K’s complaint must be

dismissed.

1. Claim Preclusion

Balfour contends that H&K’s second action is barred by

the principle of claim preclusion because it is duplicative of

the first action. There is no doubt that this action is between

the same two parties, on the same Subcontract, for the same

Project. Haines II requests the same damages through the same

factual allegations and most of the same legal theories, and

includes five counts that are largely indistinguishable from the

five counts alleged in Haines I. MTD1 at 13.

Balfour argues that by standing on its complaint in the

first action, H&K intentionally converted the July 27, 2007 Order

into a final judgment in order to obtain immediate appellate

review. Id. Thus, even though the Court of Appeals ultimately

allowed H&K to voluntarily dismiss the first appeal, Balfour

argues that H&K cannot now claim that there was never a final

order in Haines I. Id. H&K responds that Judge Golden’s Order

was never made final because our Court of Appeals granted its

11

motion to voluntarily dismiss the appeal before definitively

holding that it had jurisdiction to hear the appeal.

Although our Court of Appeals has not determined

whether state or federal preclusion analysis applies in

successive-diversity proceedings, it has suggested that it need

not decide this issue because the holding would be the same under

either state or federal law. Lubrizol Corp. v. Exxon Corp., 929

F.2d 960, 962-63 (3d Cir. 1991). “The doctrine of res judicata

protects litigants from the burden of relitigating an identical

issue with the same party or his privy and promotes judicial

economy by preventing needless litigation.” Lewis v. Smith, 361

F. App’x 421, 423 (3d Cir. 2010) (internal quotation marks

omitted).

The doctrine of claim preclusion has three elements:

(1) a final judgment on the merits must have been rendered in a

prior suit; (2) the same parties or their privies must have been

involved in both suits; and (3) the subsequent suit must have

been based on the same cause of action as the original.

Lubrizol, 929 F.2d at 963. Claim preclusion bars not only

subsequent litigation of issues decided in the first proceeding,

but also bars issues that could or should have been litigated in

the first proceeding. Selkridge v. United of Omaha Life Ins.

Co., 360 F.3d 155, 172 (3d Cir. 2004) (holding that if the three

factors of claim preclusion are present, a claim that was or

could have been raised previously must be dismissed as

precluded).

12

In considering whether to dismiss a complaint on the

basis of claim preclusion, “[w]e [do] not apply this conceptual

test mechanically, but focus on the central purpose of the

doctrine, to require a plaintiff to present all claims arising

out [of] the same occurrence in a single suit.” Sheridan v. NGK

Metals Corp., 609 F.3d 239, 260 (3d Cir. 2010) (internal

quotation marks omitted). “In so doing, we avoid piecemeal

litigation and conserve judicial resources.” Id.

Here, there is no question that the same parties were

involved in both suits. In addition, this suit is based on the

same cause of action upon which the first suit was based. H&K

and Balfour agree on these points. The only question remaining

is whether the events that followed Judge Golden’s July 27, 2007

Order rendered that Order "final" for the purposes of claim

preclusion.

Generally, a dismissal without prejudice does not

represent a final judgment on the merits and is not appealable.

Bethel v. McAllister Brothers, Inc., 81 F.3d 376, 381 (3d Cir.

1996). “Where, however, the plaintiff cannot cure the defect in

the complaint or elects to stand on the complaint without

amendment, the order becomes final and appealable.” Id.

When H&K filed its notice of appeal, our Court of

Appeals ordered the parties to address the effect of 28 U.S.C. §

1447(d) on its appellate jurisdiction. Pl. MTD2 Resp., Ex. H.

It also cautioned that “[t]his order does not represent a finding

that the Court has jurisdiction to hear the appeal in this case.”

13

Id. (emphasis in original).

Balfour argues that H&K “converted” the July 27, 2007

Order from an otherwise non-final judgment to a “final and

appealable” decision in order to invoke the jurisdiction of our

Court of Appeals. MTD1 at 17. Balfour cites Bethel v.

McAllister Brothers, Inc., 81 F.3d 376, 381 (3d Cir. 1996),

Garber v. Lego, 11 F.3d 1197, 1198 n.1 (3d Cir. 1993), and

Borelli v. City of Reading, 532 F.2d 950 (3d Cir. 1976), in

support of its contention. But those cases are distinguishable.

In Bethel and Garber, our Court of Appeals contemplated

its jurisdiction before either reaching the merits or dismissing

the appeal. If Balfour’s argument were correct, then in Bethel

and Garber our Court of Appeals would have simply noted that the

appellant had invoked appellate jurisdiction and moved on from

there. But that is not what happened. In each case, our Court

of Appeals carefully considered whether it had jurisdiction

before determining that it did and then decided the appeal on the

merits. Borelli is distinguishable because there the plaintiff

did not elect to stand on her complaint.

In Hagan v. Rogers, 570 F.3d 146, 151 (3d Cir. 2009),

our Court of Appeals considered earlier cases where it had held

that a plaintiff had elected to stand on its complaint. The

Court noted that in Frederico v. Home Depot, 507 F.3d 188, 192

(3d Cir. 2007), it had decided that the plaintiff had elected to

stand on her complaint “where at no time during the proceedings

did she seek to correct the purported pleading deficiencies, but

14

instead repeatedly asserted that her complaint was sufficient as

filed.” Hagan, 570 F.3d at 151. Hagan also noted that it had

jurisdiction “when a plaintiff did not amend his dismissed

complaint within the 30 days allotted by the district court.”

Id. (in reference to Batoff v. State Farm Ins. Co., 977 F.2d

848, 851 n.5 (3d Cir. 1992)). The Court also considered that it

had held that certain plaintiffs “elected to stand on their

dismissed claims after they renounced, by letter briefs filed

with this Court, any intention to reinstitute proceedings against

the defendants at issue.” Id. (referring to in Tiernan v. Devoe,

923 F.2d 1024, 1031 (3d Cir. 1991)).

In Hagan itself, the Court found that none of the

plaintiffs amended their complaints within the thirty days the

District Court afforded. In addition, all of the plaintiffs

joined in the appeal and there was “no evidence that any ever

wavered from their argument that they should be permitted to join

under Rule 20.” Id. Thus, the Court found that the

circumstances confirmed that the appellants stood on their

initial complaint. Id. Indeed, just last week the Court in

Boretsky v. Governor of N.J., No. 2011 WL 2036440, *2 (3d Cir.

May 25, 2011), held that it was “satisfied that the plaintiffs’

actions demonstrated that they elected to stand upon their

original complaint” (emphasis added).

We must therefore examine H&K's actions to determine

whether our Court of Appeals’s jurisdiction had attached. Here,

H&K told our Court of Appeals that it was electing to stand on

15

its complaint. But then, before our Court of Appeals had decided

whether it indeed had jurisdiction to hear the appeal, H&K

attempted to withdraw its appeal. When H&K learned that it could

not informally “withdraw” its appeal, a month and a half later it

moved voluntarily to dismiss its appeal. Our Court of Appeals

granted that motion before it decided whether it indeed had

jurisdiction over H&K’s appeal.

Thus, based on H&K’s actions, for purposes of our claim

preclusion analysis we hold that H&K did not ultimately “elect to

stand on its complaint,” and Judge Golden’s July 27, 2007 Order

was never transmuted into a "final" order. All elements of claim

preclusion are thus not satisfied here.

2. Judicial Estoppel

But Balfour also argues that H&K is judicially estopped

from asserting that the July 27, 2007 Order was not a final

judgment. Balfour reports that it has incurred significant costs

to defend the actions that H&K elected to pursue in our Court of

Appeals, in state court, and in Haines I and II, where the

parties have exchanged multiple briefs on the legal merits of

H&K’s declaratory judgment action. MTD1 at 18.

H&K contends that it argued that our Court of Appeals

should deem Judge Golden’s July 27, 2007 Order final because it

believed that the Subcontract did not contain a condition

precedent that would bar H&K from proceeding against Balfour on

claims in which Balfour, and not PennDot, is responsible for the

7 Balfour raised judicial estoppel by motion before JudgeGolden in Haines II and Judge Golden entertained oral argument onthat motion before he died. See, e.g., Pl. MTD2 Resp., Ex. L,transcript of May 7, 2009 argument at 12 ("THE COURT: Becauseplaintiffs can come in in state court, unlike federal court, canwithdraw cases with impunity. In federal court you can run intoa problem." H&K's counsel responded, "I understand, Your Honor,yes.").

16

damages sought. Pl. MTD1 Resp. at 21. H&K argues that when it

allegedly discovered that the condition precedent had been waived

(because Balfour did not represent H&K’s claims in its filing

with PennDot), this altered the legal landscape and rendered its

appeal moot. Id.

While we have just decided that this action is not

claim precluded, we now address the issue of whether the entire

action is judicially estopped, which is within our discretion to

do.7 Krystal Cadillac-Oldsmobile GMC Truck, Inc. v. General

Motors Corp., 337 F.3d 314, 319 (3d Cir. 2003). Our Court of

Appeals has held that “a plaintiff, who has obtained relief from

an adversary by asserting and offering proof to support one

position, may not be heard later in the same court to contradict

himself in an effort to establish against the same adversary a

second claim inconsistent with his earlier contention.” Id.

(internal quotation marks omitted). The Court also recognized

“the intrinsic ability of courts to dismiss an offending

litigant's complaint without considering the merits of the

underlying claims when such dismissal is necessary to prevent a

litigant from ‘playing fast and loose with the courts.’” Id.

(quoting Scarano v. Central R. Co. of N.J., 203 F.2d 510, 513 (3d

17

Cir. 1953)).

To be sure, the doctrine of judicial estoppel should

only be applied to avoid a miscarriage of justice. Id. Judicial

estoppel focuses on the relationship between the litigant and the

judicial system, and seeks to preserve the integrity of that

system. Id. at n.7. In the absence of “any good explanation, a

party should not be allowed to gain an advantage by litigation on

one theory, and then seek an inconsistent advantage by pursuing

an incompatible theory.” Id. (internal quotation marks omitted).

But the estopped party need not have actually gained an advantage

because “the application of judicial estoppel does not turn on

whether the estopped party actually benefitted from its attempt

to play fast and loose with the court.” Id. at 324.

A party is judicially estopped if (1) it has taken two

positions that are irreconcilably inconsistent, (2) it changed

his or her position in bad faith (i.e., with intent to play “fast

and loose” with the courts), and (3) there is no lesser sanction

that will adequately remedy the damage done by the litigant’s

misconduct. Id. Equity requires that the presiding court give

the party to be estopped a meaningful opportunity to provide an

explanation for its changed position. Id. at 320.

18

a. Irreconcilably Inconsistent Positions

Here, H&K took two irreconcilably inconsistent

positions. It argued before our Court of Appeals that “[t]he

condition precedent that the District Court inserted into Article

2.2.20 of the Subcontract will never be achieved. And,

accordingly, H&K will never be able to re-file its Complaint.”

MTD1, Ex. 5 at 3. H&K argued to our Court of Appeals that the

Order should be deemed "final" because the District Court

interpreted the Subcontract to require that H&K’s claims should

first be submitted to PennDot through Balfour before H&K could be

permitted to bring a suit against Balfour. Id. H&K justified

its appeal of the District Court’s interpretation of the

Subcontract because, as it without qualification put it to the

Court of Appeals on September 5, 2007,

Stated in the most succinct terms, PaDOT willnever -- nor should it -- compensate BBCI (orH&K) for BBCI’s breaches of its Subcontractwith H&K. Accordingly, the conditionprecedent as interpreted by the DistrictCourt can never be met, H&K will never bepermitted to pursue its claims against BBCIand BBCI will be able to freely breach theSubcontractor Agreement and damage H&Kwithout accountability.

Id. at 4.

H&K argued that at least some of the damages that it

sustained were due to Balfour’s behavior, not PennDot’s. Id.

Because H&K believes it has claims against Balfour, and because

Balfour had no legal avenue through which to seek compensation

for those claims from PennDot (because PennDot was not a party to

19

the Subcontract), H&K concluded that the condition precedent as

Judge Golden defined it could "never be achieved" and PennDot

would "never" compensate Balfour for H&K’s breach of contract

claims against Balfour. Id. at 3, 4. Thus, H&K argued, this

"eliminates the possibility of a second lawsuit." Id. at 5 n.3

(emphasis added).

If we accept H&K’s understanding of Judge Golden’s

interpretation of the condition precedent at face value, this was

sound logic. H&K then argues that it changed its position when

it allegedly learned that Balfour had filed a claim for

compensation from PennDot without preserving H&K’s claims. But

this later-acquired knowledge was of no significance because all

that Balfour had done was precisely what H&K argued to the Court

of Appeals Balfour would do -- seek compensation for its own

claims against PennDot without including H&K’s claims. But H&K

now argues that when Balfour filed a complaint with the Board of

Claims without seeking such specific compensation for H&K’s

claims, Balfour (somehow) did something radically new. This

purportedly paved the way for H&K to file "a second lawsuit" that

H&K flat-footedly on September 5, 2007 told the Court of Appeals

was an impossibility.

These positions are irreconcilably inconsistent. H&K

argued before our Court of Appeals that it should be permitted to

appeal because Balfour would "never" legally be able to seek

compensation for H&K’s claims against it from PennDot. H&K now

argues before us that, precisely as it predicted to the Court of

20

Appeals, Balfour failed to seek compensation from PennDot for

H&K’s claims against it. H&K contends that it relied on

Balfour's representations to Judge Golden that it would present

its claims before PennDot, but H&K also then knew -- and indeed

on September 5, 2007 stressed to the Court of Appeals -- that

Balfour would "never" be able to assert those claims when H&K

argued that its appeal should be accepted. H&K cannot have it

both ways.

H&K also took two irreconcilably inconsistent positions

when it argued to our Court of Appeals that it would “never be

able to refile its complaint” but then -- after the case had

reposed on our Court of Appeals’s docket for well over a year and

the parties had been through the mandatory mediation process --

it on November 4, 2008 filed "a second complaint" in the Court of

Common Pleas of Montgomery County before bothering to voluntarily

dismiss its appeal. H&K's thrice-used “never” to the Court of

Appeals meant that there were no circumstances under which it

could refile "a second complaint." Filing such a complaint while

the appeal was still pending is far from “never”.

H&K also represented to the state court in its second

complaint -- almost a year to the day after Balfour filed its

amended complaint in the Board of Claims -- that its appeal to

our Court of Appeals had been dismissed, but it did not make any

attempt -- formal or informal -- to withdraw its appeal until

after it filed the second complaint. Compl. ¶ 32 (“H&K has

voluntarily dismissed both the Remanded Montgomery County Action

21

and the Third Circuit Appeal without prejudice”); Pl. MTD2 Resp.,

Ex. O. H&K has offered no explanation for why it took these

irreconcilably inconsistent positions, nor why it represented to

the Montgomery County Court of Common Pleas the untruth that its

appeal had been dismissed when it had not then even tried to

withdraw that appeal. Thus, we find that H&K took two

irreconcilably inconsistent positions, and H&K has not provided

an explanation to square them.

22

b. Bad Faith

Our Court of Appeals held that a rebuttable inference

of bad faith arises when averments in the pleadings demonstrate

both knowledge of a claim and a motive to conceal that claim in

the face of an affirmative duty to disclose. Oneida Motor

Freight, Inc. v. United Jersey Bank, 848 F.2d 414, 416-18 (3d

Cir. 1998). To determine whether H&K had knowledge of its claim

and a motive to conceal that claim, we must examine the timing of

H&K’s actions. In its September 5, 2007 letter to our Court of

Appeals, H&K argued that it would "never" be able to refile its

complaint because H&K would "never" be able to meet the condition

precedent as the District Court defined it. MTD1, Ex. 5 at 5

n.3. H&K did not include the caveat that it would be able to

refile if Balfour waived the condition precedent because it

doubtless knew that our Court of Appeals would likely not accept

jurisdiction if H&K had included such a disclaimer.

H&K represents that it was PennDot’s April 29, 2008

letter explaining that because Balfour had not presented H&K’s

claims to PennDot -- that is, the very reality H&K on September

5, 2007 predicted to the Court of Appeals that was the keystone

of its assertion of finality -- that led H&K to decide that its

appeal of Haines I was moot. Compl. ¶ 127. And yet it was not

until over six months later that H&K first informally attempted

to “withdraw” its appeal -- after it had availed itself of the

benefits of pressure on Balfour of a pending appeal, the Third

Circuit's mandatory mediation program and the obtaining of a

23

briefing schedule.

H&K argues that it did not burden the judicial system

because it moved to voluntarily dismiss its appeal before our

Court of Appeals’s jurisdiction ever attached. But after H&K

elected to stand on its complaint, our Court of Appeals (1)

elected not to summarily dismiss the appeal, (2) assigned a

court-appointed mediator who attempted to broker a settlement

between the parties, (3) entertained and ruled on motions, and

(4) at H&K’s September 25, 2008 request, issued a briefing

schedule directing the parties to brief the merits of H&K’s

appeal. MTD1, Ex. 6; Ex. 10; Pl. MTD2 Resp. at 6 n.6; Ex. K.

Notably, Our Court of Appeals issued a briefing

schedule on September 29, 2008 after receiving H&K's request four

days earlier to set that schedule. Pl. MTD2 Resp., Ex. K. H&K

filed its second complaint on November 4, 2008 in the Montgomery

County Court of Common Pleas and did not move to voluntarily

dismiss its appeal until December 17, 2008 -- two weeks after

Balfour had filed a motion to dismiss H&K’s appeal, and more than

a month after it had filed its second complaint with the Court of

Common Pleas.

Thus, we can only conclude that H&K was aware of its

“new” claim well before it requested the briefing schedule. But

it had the motive to conceal this claim in the hope of keeping

the appellate pressure on Balfour while taking advantage of the

Third Circuit's mandatory mediation program -- all well before it

formally moved to have its appeal voluntarily dismissed.

24

In addition, in the complaint that H&K filed on

November 4, 2008 in the Montgomery County Court of Common Pleas,

H&K represented to that court that “H&K has voluntarily dismissed

both the Remanded Montgomery County Action and the Third Circuit

Appeal without prejudice.” Compl. ¶ 32. But that simply was not

true. To the contrary, H&K's representation was “tantamount to a

knowing misrepresentation to or even fraud on the court”.

Krystal Cadillac, 337 F.3d at 324 (internal quotation marks

omitted).

H&K represented to the Montgomery County Court of

Common Pleas that it had dismissed its Third Circuit appeal when

in fact it had not even filed its motion to voluntarily dismiss

its claim, let alone given Balfour the chance to respond or our

Court of Appeals the chance to rule on it. As a result, Balfour

removed this second action to this Court, where Haines II has

reposed since November 24, 2008, and where H&K had the benefit of

Judge Golden’s judicial resources, including oral argument on

Balfour’s motion to dismiss. H&K filed its second complaint

while its appeal was still pending in our Court of Appeals,

sought the jurisdiction of the Court of Common Pleas of

Montgomery County before it was proper to do so, and thereby

forced Balfour to defend itself simultaneously in three courts --

Judge Golden's, the Court of Appeals, and the Common Pleas Court

-- for the same action.

In our view, once Judge Golden dismissed H&K's claims

without prejudice, H&K had three options. First, it could have

25

appealed, as it originally attempted to do, making the argument

that Balfour was by then time-barred from bringing H&K’s claims

to PennDot and that Balfour could not assert claims on its behalf

to the Board of Claims anyway. Second, H&K could have decided

that Balfour was not time-barred from asserting H&K's claims (and

had standing to bring them) and waited to refile its complaint

once Balfour had collected, or failed to collect, on H&K’s claims

from PennDot. Or, third, H&K could have decided that Balfour was

not time-barred from asserting its claims, but when it realized

that Balfour had “waived the condition precedent” by failing to

represent H&K’s claims (a new legal theory that H&K raises for

the first time in this action), it could have refiled its

complaint based on that alleged waiver.

For reasons known only to H&K’s counsel, H&K did not

view these options as mutually exclusive. Instead, H&K tried to

play all the legal notes at once. In doing so, H&K affirmatively

misrepresented its procedural position and its claims to the

Court of Common Pleas of Montgomery County, to our Court of

Appeals, and to Judge Golden.

H&K’s ill-conceived strategy cost both sides money,

wasted scarce judicial resources in both the federal and state

court systems, and abused the Third Circuit's mandatory mediation

process and that Court itself. Regrettably, we can only conclude

that this was and is an “affront to the court’s authority or

integrity.” Henderson v. Chartiers Valley School, 136 F. App’x

8 Our Court of Appeals has noted that “a party has notdisplayed bad faith for judicial estoppel purposes if the initialclaim was never accepted or adopted by a court or agency.” DamThings from Denmark v. Russ Berrie & Co., Inc. , 290 F.3d 548, 559n.16 (3d Cir. 2002) (quoting Montrose Med. Group ParticipatingSav. Plan v. Bulger, 243 F.3d 773, 778 (3d Cir. 2001)). Here,although our Court of Appeals had not yet adopted H&K’s claimthat Judge Golden’s July 27, 2007 Order was a final judgment, theThird Circuit’s mandatory mediation program certainly had toaccept H&K’s claim to conduct the mediation. And although H&Kknew about the “changed facts” -- such as they were -- ever sincePennDot’s April 29, 2008 letter, it still pushed the Court ofAppeals for a scheduling order on September 25, 2008 after themediation failed. This was tantamount to affirmativemisrepresentation because H&K had all the information it neededto seek to voluntarily dismiss its appeal, and yet instead itcontinued to engage our Court of Appeals’s resources for severalmore months. H&K correctly notes that our Court of Appeals hasheld that there is an exception to the general concept ofjudicial estoppel regarding jurisdictional facts or positions;courts generally refuse to resort to the principles of judicialestoppel to prevent a party from “switching sides on the issue ofjurisdiction.” Whiting v. Krassner, 391 F.3d 540, 544 (3d Cir.2004) (internal quotation marks omitted). But here H&K did notjust “switch sides” on the jurisdictional issue. H&K alsodetermined that it had a new claim that it believed rendered itsappeal moot, but it concealed this from our Court of Appeals formonths until it had availed itself of the Third Circuit mandatorymediation program and sought and obtained a briefing schedule.

26

456, 460 n.4 (3d Cir. 2005) (internal quotation marks omitted). 8

Thus, we find that H&K played fast and loose with the courts --

with as many tribunals as it could, in fact -- and acted in bad

faith.

c. No Lesser Sanction

As our Court of Appeals has noted, “[t]he fact that a

sanction is to be used sparingly does not mean that it is not to

be used when appropriate.” Krystal Cadillac, 337 F.3d at 325.

To employ judicial estoppel, we must find that it is tailored to

address the harm identified and that no lesser sanction would

9 Indeed, H&K devoted five pages of its response to thatmotion to judicial estoppel, see Pl. MTD1 Resp. at 18-23.

27

adequately remedy the damage done by H&K’s misconduct. Here, any

lesser sanction -- such as, for example, ordering H&K to pay all

of Balfour's legal fees and costs associated with its multi-forum

folly -- would still reward H&K for duplicitous conduct in the

course of its appeals process. More seriously, it would not

compensate the three courts for their waste of scarce judicial

resources. To allow H&K to continue to press its claims in

Haines II would perpetuate an injustice and would compromise the

integrity of the state and federal judicial systems. Thus, we

find that judicial estoppel is the only adequate sanction under

these extreme circumstances.

d. Opportunity to Explain

Finally, equity requires that we give the party to be

estopped a meaningful opportunity to provide an explanation for

its changed positions. Id. at 320. But here, H&K has had not

one, but two opportunities to address the issue of judicial

estoppel, once before Judge Golden -- when Balfour raised the

issue in its original motion to dismiss 9 and Judge Golden

afforded oral argument on that motion -- and once before us. In

addition, most of the pertinent facts are taken from court

records, and H&K itself supplied the rest. Thus, we find that

H&K has had fair opportunities to argue that the doctrine does

not apply, and has failed to present persuasive arguments on that

subject.

Conclusion

We therefore hold that H&K is judicially estopped from

retreating from its unqualified representation to the Court of

Appeals that Judge Golden's July 27, 2007 Order "eliminates the

possibility of a second lawsuit" and therefore grant Balfour's

motion to dismiss the second lawsuit H&K filed. Because we have

granted Balfour’s motion to dismiss Haines II pursuant to Fed. R.

Civ. P. 12(b)(6), we need not address Balfour’s Fed. R. Civ. P.

12(b)(7) contentions.

BY THE COURT:

__\s\Stewart Dalzell

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

HAINES & KIBBLEHOUSE, INC. : CIVIL ACTION:

v. ::

BALFOUR BEATTY CONSTRUCTION, :INC. : NO. 08-5505

ORDER

29

AND NOW, this 1st day of June, 2011, upon consideration of

defendant’s amended motion to dismiss (docket entry # 29),

plaintiff’s response thereto (docket entry # 32), and

defendant’s reply (docket entry # 35), and each brief’s

exhibits, and in accordance with the accompanying Memorandum, it

is hereby ORDERED that:

1. Defendant’s motion to dismiss (docket entry # 29) is

GRANTED;

2. Plaintiff’s complaint is DISMISSED WITH PREJUDICE; and

3. The Clerk of Court shall CLOSE this case

statistically.

BY THE COURT:

__\s\Stewart Dalzell